Trade-based money laundering (TBML) is one of the primary channels used to launder the proceeds of Latin American criminal activity, including narcotics trafficking and corruption. Though anti-money laundering reforms have focused on stopping banks from facilitating such activity efforts have “failed to address safeguarding international trade”, resulting in a “systemic defect” in the fight against financial crime. Letters of credit, documentary collection and factoring benefit from greater insight into the validity of trade finance transactions as they receive documentary information such as invoices and bills of lading.
A professional money laundering network in Colombia that has been accused of using fake export contracts to move funds to front companies in Mexico, Costa Rica, Panama, and Chile. High-risk area is the tri-border area between Argentina, Brazil and Paraguay, a region that serves as a “hub for criminal activity” across the continent and “where TBML was very popular. Though some banks have responded to these risks by refusing to do business with artisanal and small-scale mining, that risks pushing such activity into underground channels or through shadow banking systems. US should also consider creating a standardized means of collecting and sharing trade data, it says, pointing out that investigators often encounter difficulties linking the import and export sides of a trade transaction.